Should You Buy Your Next Car Now – Or Wait For Better Days?

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May 27, 2011

It’s a question that many Americans are asking themselves. Buy now, or wait for better deals on both new and pre-owned vehicles. Complicating the question are the after-effects of the last few tumultuous years: an economic downturn, gyrating gas prices, and a car industry that is constantly fighting for survival in an eternal battle that now includes earthquakes, tsunamis, and the practical issue of supply chain disruptions.

Historically during the latter days of these spring months, many American consumers hold off buying their next vehicle until the big July 4th sales offered at most car dealerships. The auto industry has long promoted these sales events as the best of the year, and consumers have responded in huge numbers. But reality is not living up to the hype. Prices are up, incentives are down, and many fuel-efficient vehicles are only available for a premium price. What is a car buyer to do? Wait or buy now?

Incentives

Let’s take a look where we’re at. One of the biggest savings available to car buyers are the massive incentives auto manufacturers make available on a selective basis. For example, there are currently $4,000 or more in rebates on some of the most popular trucks that Americans drive (only good to May 31, 2011). But during a time of high gas prices, you won’t find similar offers on fuel-efficient sedans or economy cars. They are just too popular.

Unfortunately for consumers, incentive offers are way down compared to last year. And don’t expect much from the Japanese carmakers. After all, why offer cash back when you can’t supply enough cars to meet demand.

If you need zero percent financing, or cash back to help with the down payment, the Big 3 auto makers remain the biggest spenders in this area and in this order:

1. General Motors

2. Chrysler

3. Ford

With continuing post-Japanese earthquake inventory issues, no short-term change is expected in the amount or volume of incentives offered by carmakers. If incentives are not a current factor in deciding to buy, what about price?

High prices

The supply of Japanese-made vehicles continues to be reduced. This has put upward pressure on prices for all comparable vehicles, no matter the make. A recent report by Edmunds said that the average vehicle transaction price has increased about $1,000 in the last year. Can dealers sustain these high prices through the summer and fall? It’s anyone’s guess. However, inventories of Japanese-made vehicles won’t get back to normal for months at the earliest, and the end of the year at the latest, depending on the manufacturer.

Waiting to see if prices come down will be similar to rolling the dice in Las Vegas. You pay your money and take your chances.

What about used cars? Prices on pre-owned vehicles are at an all-time high. Even dealers can’t believe what a two or three year old mid-sized sedan is selling for these days. Anything that gets great gas mileage is going for a premium. Prices on many popular cars are up one to three thousand dollars over a year ago. Unbelievable.

Will prices of used cars stay high or begin to come down? Part of that answer will be determined by gas prices. The price of a gallon of gasoline has come down in recent weeks. However, some reports indicate prices will shoot up again before Labor Day.

The other part of the equation is related to new car sales and the numbers of trades dealers are able to get their hands on. Don’t expect much change in the short-term.

What to do

As you can see, my crystal ball isn’t working at the moment. Part of the problem is the auto industry is in a state of flux and there are too many variables to know what will happen next with new and used car sales and prices. As usual, it’s every consumer for themselves as they make the best decision they can with the information available.